Recording Business Transactions

Recording Business
Transactions

Table of Contents
INTRODUCTION...........................................................................................................................1
ASSESSMENT 1.............................................................................................................................1
PART 1............................................................................................................................................1
Decision makers and their need for accounting information: .....................................................1
Advantage and Disadvantage of recording accounting information:..........................................2
PART 2............................................................................................................................................3
Journal entries with narration for the David wises:.....................................................................3
PART 3............................................................................................................................................4
Ledger and trail balance of Pearce & sons:................................................................................4
PART 4............................................................................................................................................6
Income statement for Airman co.:...............................................................................................6
Impact of COVID 19 on company income statement items:.......................................................6
ASSESSMENT 2.............................................................................................................................7
PART A...........................................................................................................................................7
Journal transactions of T- accounts:............................................................................................7
Balance the accounts and an opening balances:..........................................................................8
Trial balance:.............................................................................................................................11
Income statement for the period 31st Oct. 2020:.......................................................................12
Preparation of financial position 31st Oct. 2020:......................................................................12
PART B..........................................................................................................................................13
Ratio calculation for Linda's business:......................................................................................13
Analysis of ratio analysis in comparison to its competitors:.....................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
A business transaction is an event that includes transactions of goods, money and services
between two or more than two parties. Business transactions are events that must be measurable
in money and recorded in accounting system. For example; Buying machinery from suppliers.
Business transactions are activity which is measured in monetary terms and which affects the
financial position of the company. These transactions affects on such accounting elements-
capital, assets, liabilities, expenses and income (Brennan, Canning and McDowell, 2020).
Business transaction recording are important in any business in order to know about its financial
position and growth. This report is based on various companies business records. This covers
topics such as journal, ledger and trial balance. Apart from this it also covers cash account and
ratio analysis in comparison to competitors.
ASSESSMENT 1
PART 1
Decision makers and their need for accounting information:
Financial accounting is a element of accounting that oversee the position of the company.
Under standard guidelines, transactions are summarising, recording and presented in the financial
statements such as profit and loss account and balance sheet. These statements are known as
external because they used to given to the outside of the company such as clients and
shareholders. The reason behind it financial statements are used by various people in various
ways, it has common standard that is known as Accounting standard and Generally accepted
accounting principles (GAAP) (Chaffey, Edmundson-Bird and Hemphill, 2019). It provides
information to managers so that they can make decisions regarding companies activities.
Investors and analyst also used this information for the valuation and worth of the company in
order to allow them to set prices and shares prices. Financial account is helps firm to track its
activities for future decision-making. It also helps companies for day to day activities and
identify what can give it future benefits for its growth.
Financial accounts shows all the information related to monetary terms of the company
which helps management and shareholders in order to decision-making process. This helps
management for knowing resources which are profitable to company and which gives insight to
managers for budget making (Chen, Liao and Wang, 2020). Through this company can compare
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itself by past data and know the reasons regarding changes in the year. The information is used
by internal managers such as internal decision making, also helps in hiring, compensation, sales
and promotional activities, marketing, investment etc.
Advantage and Disadvantage of recording accounting information:
Accounting refers to a process in which financial transactions of the businesses are
recorded. The process of accounting includes summarising, analysing and reporting those
transactions which are related to oversight agencies, regulatory bodies and tax collection
companies. It is useful in business for measurement, processing and communication of financial
information for running its activities (Samuels, 2019). It helps managers for decision making
regarding sales, activities, promotional activities, employees hiring and investments. it has
common standard that is known as Accounting standard and Generally accepted accounting
principles (GAAP).
Advantages: Mentioned below are some advantages related to recording accounting
information:
 Main business records: Accounting shows each and every transaction of the business
finance because it systematically maintain the books of all business monetary
transactions. It helps in tax paying and to estimate about the budget. It records all
transactions that are occurs in its day to day activities in credit and cash basis. For
example, if company buy furniture that it records it in its accounting books (Johnson,
2015).
 Helps in preparing financial statements: Preparation of financial statements is
necessary for knowing all losses and profits and real value of the organisation. It helps in
knowing all relevant accounting data for the preparation of financial statements such as
profit and loss account (Rezaei, ed., 2017). Through journal, ledger and trial balance
companies prepares its financial statements as p & l and balance sheet.
Disadvantages: Disadvantages of recording transactions are mentioned below:
 Provides insufficient information: Financial accounting not provides detailed
information related to different department and processes and other activities within the
organisation. It provides information of whole organisation as an unity liabilities, assets,
loss and profits of organisation. It refers overall transactions of the company at a one
place only without any department guidelines.
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 Records actual cost: It does not considers price fluctuations that are taking place time to
time, it records historical information or the actual cost of acquisition of assets. The value
of not always remains the same and it changes with the time. Financial accounting shows
inaccurate data and based on past transactions (Laudon and Traver, 2016).
PART 2
Journal entries with narration for the David wises:
Journal Entries
S. NO Date Particulars L.F £ £
1 01/02/20 purchase return A/C Dr. 350
To Purchase A/c 350
( Being purchase return with full
settlement)
2 04/02/20 Bad debts A/c Dr. 85
To S. keys A/c 85
(being debt debt written off by S.
keys)
3 09/02/20 Machinery A/c DR. 2300
To Bank 200
To TS CO. 2100
( Being machinery purchase with
cash Rs. 200 and 2100 on credit)
4 13/02/20 Cash account 220
Bad debts A/c 50
To S. hill Ltd. 270
( money owed by S. hill 270 and
paid only 220, Rs. 50 declare as
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bad debts)
5 20/02/20 Drawing A/s Dr. 180
To Stock 180
6 26/02/20 Insurance A/c Dr. 85
To Cash A/c 85
( Business paid money for
private house insurance)
7 28/02/20
Machinery A/c
DR. 1050
To bank A/c 1050
(amount paid by TS CO. for half
amount credit on machinery)
Total 4320 4320
PART 3
Ledger and trail balance of Pearce & sons:
A. General ledger
Ledger Accounts
(Amounts in GBP)
Capital Account
Date Particulars Amt. Date Particulars Amt.
01/02/20 By Bank A/c 21500
01/02/20 By Van A/c 25000
01/02/20 By Office Fixture A/c 800
29/02/20 To Balance c/f 47300
Total 47300 Total 47300
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